PMLA Prosecution Hinges on Scheduled Offence: High Court Quashes Case

The High Court concluded that the prosecution under the Prevention of Money Laundering Act cannot continue if the scheduled offence is quashed. The foundation of the PMLA prosecution relies on the commission of a scheduled offence, and if this basis is removed, the prosecution under the PMLA must be dismissed. Consequently, the High Court quashed the proceeding in Criminal Misc. Case (PMLA) No.40 of 2017.

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Issues Involved:
1. Legality of the proceeding under Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) in Criminal Misc. Case (PMLA) No.40 of 2017.
2. Impact of quashing the schedule offence on the prosecution under Section 3 of the PMLA.
3. Interpretation of the PMLA as a standalone offence versus its dependency on the scheduled offence.

Detailed Analysis:

1. Legality of the proceeding under Section 45 of the PMLA:
The petitioner challenged the legality of the proceeding under Section 45 of the PMLA, arguing that the prosecution is unsustainable in law. The petitioner contended that since the schedule offence was quashed by the High Court in CRLREV No.596 of 2018, the prosecution under Section 3 of the PMLA should also be terminated. The petitioner emphasized that no role was attributed to him in the distribution of coal to non-functional MSMEs, thus nullifying the basis for the PMLA prosecution.

2. Impact of quashing the schedule offence on the prosecution under Section 3 of the PMLA:
The petitioner argued that the offence of money laundering under Section 3 of the PMLA is dependent on the commission of a scheduled offence. Since the scheduled offence was quashed, the prosecution under the PMLA cannot stand. The petitioner cited the Supreme Court's decision in Vijay Madanlal Choudhury, which held that the offence under Section 3 of the PMLA is dependent on the illegal gain of property as a result of criminal activity relating to a scheduled offence. If the scheduled offence is quashed, there can be no offence of money laundering.

3. Interpretation of the PMLA as a standalone offence versus its dependency on the scheduled offence:
The Enforcement Directorate (ED) argued that the PMLA is a special law with a distinct procedure and that the offence under Section 3 of the PMLA is independent of the scheduled offence. The ED contended that the PMLA prosecution should continue regardless of the quashing of the scheduled offence. The ED cited several High Court decisions supporting this view, including Smt. Janata Jha, Radha Mohan Lakhotia, VGN Developers Private Limited, and Babulal Verma. These decisions held that the PMLA is a self-contained law and that the offence of money laundering can stand independently of the scheduled offence.

However, the High Court referred to the Supreme Court's decision in Vijay Madanlal Choudhury, which clarified that the offence of money laundering under Section 3 of the PMLA is dependent on the commission of a scheduled offence. The Supreme Court held that if the scheduled offence is quashed, the prosecution under the PMLA cannot continue. The High Court also noted that the Explanation to Section 44 of the PMLA, introduced by the 2018 Amendment, does not alter this fundamental principle.

Conclusion:
Based on the Supreme Court's decision in Vijay Madanlal Choudhury and the interpretation of the PMLA, the High Court concluded that the prosecution under the PMLA cannot continue if the scheduled offence is quashed. The High Court held that the foundation of the PMLA prosecution is the commission of a scheduled offence, and if this foundation is demolished, the prosecution under the PMLA must fall. Consequently, the High Court quashed the proceeding in Criminal Misc. Case (PMLA) No.40 of 2017 pending before the learned District and Sessions Judge-cum-Special Judge (PMLA Act), Khurda at Bhubaneswar.

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